Research on the Impact of Financial Deepening on Digital Economy Development: An Empirical Analysis from China

Financial deepening aims to promote economic development. In the past years, China's digital economy has achieved remarkable development achievements, and its role in guiding and supporting sustainable economic and social development has become increasingly prominent. Therefore, it is worth considering whether financial deepening can effectively support the development of the digital economy and what the impact pathway is of financial deepening on digital economy development. Based on panel data from 2013 to 2021 at the provincial level in China, this study constructs a comprehensive indicator system for digital economy development using the entropy method. The indicator comprises four dimensions: digital infrastructure, digital industrialization, industrial digitalization, and digital services. By utilizing fixed effects models and mediation effects models, this study investigates the impact and transmission mechanisms of financial deepening on digital economy development. The research results indicate that financial deepening significantly improves the level of digital economy development and passes the robustness test. Heterogeneity tests indicate that financial deepening contributes more to promoting digital economy development in the central and western regions compared to the eastern region. Financial deepening promotes the digital economy development through the intermediary pathway of technological innovation, where technological innovation serves as a mediator between the two. In the future, it is crucial to fully leverage the supportive role of financial deepening, promote technological innovation, and further drive the sustainable development of the digital economy.